Dej-Udom & Associates Business and Legal Update – February 2014

The Dej-Udom & Associates monthly business and legal update for Thailand and the ASEAN region for February 2014

COUNTDOWN 2015 – ASEAN Economic Community ||

Thailand has confirmed to other ASEAN nations that, despite the political unrest, the Kingdom is still on track to proceed with the ASEAN Economic Community (AEC) integration next year. Certain documents including ones concerned with the liberalization of business services, adjustment of investment regulations and reserved businesses must be signed by each country before the 2015 deadline. In addition, ASEAN countries must ratify the ASEAN-Indian free-trade agreement on services & investment.

The Singapore Trade and Industry Minister recently noted that plans to create the ASEAN Economic Community (AEC) provide a mutually reinforcing pathway to the establishment of the Asia-Pacific Economic Cooperation’s (APEC) goals to achieve a Free Trade Area of the Asia-Pacific (FTAAP). The plan conforms to APEC’s Bogor Goals set in 1994 which call for free and open trade for developing economies by 2020.

Laos Trends
Rule of Law State
The Laos Deputy Minister of Justice notes that Laos needs to have a full set of laws covering all sectors in order to progress. The Justice Ministry has launched a comprehensive new three-year support program to assist Laos to become a rule of law state. Since liberalization in 1975, the Lao National Assembly has only passed about 100 laws. This is considered insufficient in terms of national development.

ASEAN Preparation
In terms of ASEAN development, Laos needs to improve in a number of areas. Rules and regulations related to business operations must be created. Additionally, infrastructure, and financial services must be improved along with government coordination.

Myanmar Watch
Business Restrictions Eased
By March 2014, the government plans to ease business restrictions and change its reputation as being one of the most difficult places to do business by lightening regulations concerning the business sector. According to the World Bank, Myanmar is presently rated 182 out of 189 countries in terms of difficulties in doing business. Research found that obtaining a business license can take anywhere from one week to one year.

US Exim Bank Launches Operations
In order to support US exporters, the US Export-Import Bank has launched operations in Myanmar. The bank will provide export credit insurance, loan guarantees and direct loans for export sales. Short-term insurance for sovereign transactions will be available as well as medium-term insurance for loan guarantees.

Vietnam Update
Revised Bidding Law
A new bidding law came into effect in January which gives priority to local bidders. Foreigners are still welcome to take part in bidding in Vietnam, but they must work in partnership with a local company.

Indonesian News
New Export Law Provides for Export Limits
The Indonesian parliament has passed the nation’s first trade bill in order to support the government’s goals to promote local production and boost manufacturing capabilities. The law gives the government the power to restrict exports and imports in order to protect local industry.

Philippine Update
Online Libel Law Upheld
The Philippines Supreme Court has upheld a controversial cybercrime law that penalizes online libel. The law penalizes the sender, not the recipients, but has been criticized for curbing internet freedom.


Banking and Finance
Assistance for SMEs
Due to the ongoing political situation, financial challenges for small and medium enterprises (SME) are increasing as their cash flow keeps shrinking. The Bank of Thailand (BOT) is worried about damage to the SME segment in terms of cash flow and revenue and has asked commercial banks to assist SME liquidity by reducing interest rates or by extending payment due dates. The Federation of Thai Industries has also requested banks to extend loan periods

Banking System Performance
The BOT reported that Thailand’s banking system was resilient with good performance in 2013. Credit growth did slow, but lending expanded by 11%. Corporate loans expanded by 10% due to more loans to SMEs and large corporations. BOT says non-performing loans are low at 2.2% (gross NPLs to total loans) and if uncertainty drives this rate up, experts believe commercial banks are strong enough to overcome problems.

Minimal Capital Outflows
BOT reports that outflows for the beginning of 2014 were minimal compared to the previous period, and even with the large sell offs occurring in late 2013, emerging markets have been stable and continue to attract investors. BOT believes capital outflows have not increased because investors have already priced in the risks from the ongoing political situation.

Registrations Up in 2013
The Commerce Ministry reported a 5% growth in business registration for 2013 mostly in the real estate and property sectors. As of year’s end, there were 559,713 registered businesses nationwide with a total registered capital of Baht 10.75 trillion.

New Industrial Estates
The Industrial Estate Authority of Thailand approved five new industrial estates with the goals of attracting Baht 300 billion in new investments, expanding the country’s industrial sector, and creating 120,000 new jobs.
Securities and Exchange

SEC Relaxes Rule Test
The Securities and Exchange Commission (SEC) announced that beginning April 1st, institutional clients of registered derivatives dealers and fund managers are no longer required to conduct suitability tests. The SEC deems that such institutions are capable of making their own investments.

Pride of the Provinces III
Due to the success of the two earlier programs, the Securities and Exchange Commission (SEC) launched the Pride of the Provinces III in cooperation with public and private sector partners. The goal is to increase the understanding of business and capital markets in the provinces and how to raise funds. Qualified companies can attend training courses and can also seek advice on IPOs and listing requirements from financial professionals, the SEC and the Stock Exchange of Thailand (SET).

Board of Investment
Appointments Still Delayed
The Election Committee ruled this month that the caretaker government did not have the authority to appoint new Board of Investment (BOI) members or approve new investment privileges.

Diesel Tax Cut Extended
For Bangkok and neighboring provinces, the government extended the diesel excise tax reduction of 0.005 baht/litre until March 28.

India Free-Trade Agreement
In order to reduce their large trade deficit with Thailand, India may withdraw gold and other products from the current free trade agreement (FTA). Compared to their normal 15% tariff, India only has a 1% tariff on Thai gold which has led to traders exporting gold to India under the FTA tariff. India suspended the gold tariff exemption last year and Thai gold shipped to India in 2013 dropped to US 9 million from US 124 million in 2012.

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